Investigation: What made Apple freeze out Adobe?

This article was taken from the July issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online

On Friday, January 29, Steve Jobs called an all-hands "town hall" meeting for Apple staff at the company’s Cupertino headquarters in California. The reason was the iPad, the "magical and revolutionary" tablet Jobs, the legendarily perfectionist CEO, had introduced to the world just two days earlier.

Outsiders were not invited, so the discussion was especially frank. Jobs kicked off by declaring that Google’s mantra -- "Don’t be evil" -- was "a load of crap". Google had recently introduced its Nexus One, an iPhone competitor, and although in some ways the two companies were aligned, "teams at Google want to kill us," Jobs said. The audience roared. Jobs moved on to Adobe, another longtime ally, which he called "lazy".

Adobe’s Flash, the de facto standard for multimedia on the web, would not be supported on the iPad or iPhone, Jobs said, because it was "buggy", caused frequent crashes and hogged processing capacity. As the news filtered out, it caused an outcry. It had not mattered too much that the iPhone had failed to support Flash for three years, but on the iPad it seemed a major hole -- maybe even a death blow.

Apple was pitching the iPad as a media-consumption device, perhaps even the saviour of the book and magazine industries -- it would "stand on [the Kindle’s] shoulders and go a little further", Jobs promised as he showed off Apple’s new iBooks app at the iPad launch in January. But web video would be a problem without Flash. According to Adobe, the iPad would not be able to play the 75 per cent of online video that relies on its plug-in: no rich-media slideshows, no BBC iPlayer, no Hulu.

Jobs was also barring access to thousands of online casual games coded in Flash. So no Farmville for iPad users. Two months later, in early April, Jobs dropped a nuke on Adobe. Apple modified the language in its iPhone developers’ agreement, a 21,000-word document which sets out the terms for those producing software for the iPhone and iPad. In particular, it added a couple of lines to section 3.3.1, prohibiting the use of "intermediary translation tools" and "compatibility layers" by developers.

The technical language belied the new wording’s significance. "Applications must be originally written in Objective-C, C, C++, or JavaScript as executed by the iPhone OS WebKit engine, and only code written in C, C++, and Objective-C may compile and directly link against the Documented APIs," it stated. "Applications that link to Documented APIs through an intermediary translation or compatibility layer or tool are prohibited."

Adobe was not mentioned by name -- but the new language was widely seen as targeting Adobe’s Packager for iPhone tool. It also affected about half a dozen so-called "cross compilers", programming tools that compile software so that it can run on different hardware and operating systems. The Packager is an integral part of Adobe’s CS5, the long-awaited update to its flagship Creative Suite software -- which includes Photoshop, InDesign and Acrobat -- due for release a few days after Apple’s rewording.

The updated software promised a simple means of converting Flash apps to work on the iPhone and iPad. And now Apple had banned it. Among Flash developers, there was an outcry. "This is akin to telling people what kind of desk people sit at when they write software for the iPhone," wrote Mac developer Hank Williams in a widely linked blog post titled: "Steve Jobs Has Just Gone Mad".

Some developers, already concerned at what they saw as Apple’s sometimes arbitrary rejection of software at its App Store, became nervous: "This issue is exactly why developers fear being sharecroppers," wrote David Heinemeier Hansson on the 37signals blog. "One day you’re happily developing an application for Apple’s platform and dreaming of big things to come, the next Apple kills you dead with the stroke of a pen." Walt Mossberg, of the Wall Street Journal, posited in a TV interview that "there’s bad blood between Apple and Adobe. I can’t imagine that doesn’t play a role."

Adobe reacted with uncharacteristic fury. In a remarkably frank blog post, a company evangelist, Lee Brimelow, told Apple to "go screw yourself". He published a series of screenshots showing what the web might look like without Flash: lots of empty spaces with blue Lego bricks representing the disabled Flash plug-in. Legal action was a possibility: in a regulatory filing, Adobe said it could suffer material loss. "To the extent new releases of operating systems or other third party products, platforms or devices, such as the Apple iPhone or iPad, make it more difficult for our products to perform, and our customers are persuaded to use alternative technologies, our business could be harmed," Adobe said in a submission to the US Securities and Exchange Commission.

Adrian Ludwig, an Adobe group product manager for Flash, believes that Apple banned Flash to protect its content revenue streams through iTunes. If consumers can play free Flash games and watch free television shows on sites such as Hulu, Ludwig told Wired, they would not buy the same content through iTunes.

"It’s pretty clear if you connect the dots: the issue is about revenue," he said. "Apple has eliminated any way to get content on the device that they don’t own." Two weeks later, Adobe threw in the towel, announcing that it was no longer developing the Packager for iPhone tool, although it would remain part of the CS5 toolkit. Mike Chambers of Adobe warned developers that Apple wanted to tie them down, but was dangerously capricious: "As developers for the iPhone have learned," he blogged, "if you want to develop for the iPhone you have to be prepared for Apple to reject or restrict your development at any time, and for seemingly any reason."

Google, meanwhile, pledged its support for Flash on its Android phones. The two companies have said they are currently beta testing Flash 10 on Android, and Adobe CEO Shantanu Narayen has said that "Google and RIM and Palm are going to be releasing versions of Flash on smartphones and tablets in the second half of the year". And then the battle went nuclear.

In mid-May, newspapers including the Financial Times and Wall Street Journal carried full-page advertisements from Adobe, headlined: "We [heart] Apple". "We love creativity. We love innovation. We love apps..." it began. "What we don’t love is anybody taking away your freedom to choose what you create, how you create it, and what you experience on the web." Kerpow!

Apple and Adobe were once so close. The companies jointly invented desktop publishing in the late 80s -- the killer app that launched the Mac and turned Adobe into one of the world’s most successful software companies. For a decade, Apple and Adobe rode each other’s coattails.

Adobe made killer software for creative professionals, and Apple sold Macs to run it. But in 1989 the partnership started to fall apart. Adobe was licensing its fonts to Apple and Microsoft, a big source of revenue. Seeking to avoid Adobe’s expensive font-licensing fees, Apple teamed up with Microsoft to develop a competing system, TrueType. When True-Type was announced in September 1989, Adobe’s founder, John Warnock, said Apple had made a deal "with the devil".

In 2001, when Apple was developing OS X, its next-generation operating system, Jobs went to Adobe, Microsoft and Macromedia and asked them to port their applications to his new system. Without software to run on it, who would buy OS X? Yet only Microsoft -- Apple’s arch rival-- pledged its support, thanks to an earlier agreement between Bill Gates and Jobs. Adobe and Macromedia both refused.

Photoshop comprises millions of lines of code, and porting it would require years of developer-resources. Apple’s future was at risk. Its share of the personal-computer market had dropped from 16 per cent in the late 80s to about four per cent in 2001. The snub hurt. "It was a huge issue for us," Cordell Ratzlaff, the designer of OS X’s interface, told Wired.

Apple, meanwhile, moved back into the application-software business, producing products such as iTunes and iMovie in-house. Some people close to both companies suggest there may be an undercurrent of revenge in Jobs’s stance towards Adobe. "I’m sure there’s an emotional element," said Derrick Story, a former O’Reilly Network editor who ran websites for both companies simultaneously in 2007: Lightroom (Adobe) and Inside Aperture (Apple).

"The two cultures were radically different," Story said. "I’ve sensed for some time that Adobe forgot their genesis, their roots, and how they got started on the Mac. Some resentment built up and that resentment is at play now." "Apple’s dislike of Flash is a veiled version of its leader’s seething animosity to Adobe," Simon Jary, publishing director of PC Advisor and contributing editor of Macworld, told Wired.

"When Steve Jobs doesn’t like something or someone, he doesn’t do half measures. He wants to destroy, completely. He wants to assassinate Flash. If that delivers a mortal blow to Adobe, then so be it." Adobe did eventually make most of its key products available for Mac. But within Apple, concern grew that too often third party software for Macs was second-rate translations of Windows applications hastily recompiled.

Tools such as Java and Adobe AIR allow programmers to write software -- typically targeted at Windows, the dominant platform -- and then offer it for the Mac with minimal changes or none at all. Jobs has taken note. This concern lies at the heart of the changes to the iPhone developers’ agreement: Jobs is determined that there will be no shortcuts for apps offered on the iPhone.

"We know from painful experience that letting a third-party layer of software come between the platform and the developer ultimately results in substandard apps and hinders the enhancement and progress of the platform," Jobs wrote in "Thoughts on Flash", an open letter published prominently on Apple’s website in early April.

"If developers grow dependent on third-party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers…"

"Adobe has been painfully slow to adopt enhancements to Apple’s platforms. For example, although Mac OS X has been shipping for almost ten years now, Adobe just adopted it fully (Cocoa) two weeks ago when they shipped CS5. Adobe was the last major third-party developer to fully adopt Mac OS X."

"I’m not so quick to buy into the image of Steve Jobs as some sort of evil genius sitting in a volcano lair stroking a cat, plotting taste-making control of all of our electronics," said John Gallaugher, associate professor of information systems at Boston College, who has written influential papers about network effects in the software industry. "Apple isn’t about control as much as they’re about experience. The walled garden is created to keep things beautiful, easy to use and functioning well. That’s a very important distinction."

Analyst Tim Bajarin, president of Creative Strategies, concurred: "I’m not saying Steve Jobs isn’t a control freak, but this is not an example of his need for control. This is one of those situations where Apple is asking, what’s best for the consumer?"

The true key to the iPhone’s success, Gallaugher said, comes from the tight integration between Apple’s hardware and the software that runs on top of it. Apple’s insistence on using only approved programming tools keeps the integration tight. Any added intermediary layer -- although convenient for developers -- breaks that tight hardware integration. Flash also presents serious security concerns, according to Gallaugher.

In 2009, Adobe’s Flash and Acrobat Reader were highlighted by the security firm Symantec in its annual Internet Security Threat Report as being targeted by hackers. "If there’s a hole in the iPhone, it will be terrible press for Apple -- ‘iPhone is not safe! The hacker in your pocket!’ That’d be a seriously brand-eroding event." And then there’s Flash itself.

In his open letter, Jobs said that Flash drained the batteries of mobile devices and was the leading cause of instability on Macs. "Flash is the number-one reason Macs crash," he wrote. "We have been working with Adobe to fix these problems, but they have persisted for several years now. We don’t want to reduce the reliability and security of our iPhones, iPods and iPads by adding Flash."

Adobe’s CEO Narayen responded by telling the Wall Street Journal that Jobs’s accusation that Flash drains battery life was "patently false", and that any problem with crashes was the fault of the Mac operating system." It’s a smoke screen," he insisted. "The technology is not the real issue."

Nonetheless, Flash has gained only limited traction in the mobile market. Back in 2004, Adobe tried to persuade handset makers to adopt Flash Lite, a stripped down version of desktop Flash, but the project faltered.

Since 2007 the company has been promising the full version of Flash for smartphones, but has yet to deliver. Last year at the GSMA Mobile World Congress in Barcelona, Adobe promised Flash for Windows Mobile, Android, Nokia and Palm, but none of these platforms is yet running Flash. Google’s Android promises to be the first. Adobe says it is still working on Flash for the other smartphone platforms. "We are working to bring Flash Player and AIR to all the other major participants in the mobile ecosystem," said Adobe’s CTO, Kevin Lynch, in response to Jobs’s open letter.

“[Flash] performance has always been a dog,” said Peter Hoddie, former chief architect of QuickTime at Apple, who is now president of Kinoma, a Silicon Valley firm that makes media players.

“Developers have never been happy with the mobile feature set. The tools haven’t addressed the core challenges of mobile… If Adobe had wanted to, they could have innovated on mobile long before iPhone but they never really focused. They assumed that, because of their success on the PC, they were entitled to a place in mobile. But mobile is a different world.”

Instead of Flash, Apple is pushing a combination of web standards: CSS (cascading style sheets), used to format web pages; H.264, a video-compression technology; and HTML5, a yet-to-be-ratified revision of the web’s basic mark-up language. “HTML5, CSS, JavaScript, and H.264, all supported by the iPhone and iPad, are open and standard, while Adobe’s Flash is closed and proprietary,” said Apple spokeswoman Trudy Muller.

The stakes are high. Apple is gambling that the software and media industries will back its position, porting apps and content written in Flash to the App Store. Yet this is not guaranteed: Flash is one of the most popular technologies on the web today.

As Dominique Jodoin, who runs a Flash developer called BlueStreak Technologies, points out, “There are 1.2 billion Flash-capable mobile phones; 70 per cent of online gaming sites run Flash; 98 per cent of internet-enabled desktops use it; 85 per cent of the top 100 websites use Flash. It’s the No 1 platform for video on the web -- 75 per cent of all videos use Flash, including Hulu, Disney and YouTube. There are two to three million Flash developers; 90 per cent of creative professionals have Adobe software on their desktops… With numbers like that, the better question is, why wouldn’t I choose to support this technology?”

Still, the rapid growth of the mobile internet is transforming the industry -- and disrupting the existing order. The key building block of the mobile web isn’t the website; it’s the app. Twitter, Foursquare, Spotify all are apps. Established web-friendly firms such as eBay and Facebook, even high-street banks, are finding that consumers prefer engaging with them through apps. The browser maybe less significant in the web’s future. And that is why Apple’s move is more than simply rivalry with another software house.

Tim O’Reilly, who described the rise of Web 2.0 (and coined the term), believes that apps on mobile devices may soon overtake the web itself as the main platform for consumer software. And Apple is in a position to fundamentally shape the mobile web. There’s also a new economics.

On the desktop web, text and banner advertising -- the latter often powered by Flash -- have traditionally provided sites with revenue. Now there is a new battle to find a way to monetise free apps with mobile advertisements. This is why last year Apple and Google scrambled to acquire AdMob, one of the early leaders in mobile advertising.

Google won, outbidding Apple at the last minute -- so Apple snapped up rival Quattro Wireless instead. The fruits of Apple’s acquisition have just been revealed: Apple has built Quattro’s ad technology into the very heart of iPhone OS 4.0, as a new system called iAds. It’s a bold move. Advertising is going to become integral to the app experience.

Jobs promises it will be more creative and immersive than simple banner ads. And that spells trouble for Flash. “Until six months ago, I thought Flash was the way to go,” says David Blatner, who has written more than a dozen books about desktop publishing, most of them on Adobe’s products.“But in the last six months, that view has really eroded.” US federal authorities are reportedly preparing to launch an investigation into the Apple/Adobe spat -- on the prompting of Adobe, according to Bloomberg.

Adobe complained that Apple’s ban on cross-compilers is anticompetitive and is stifling innovation. Investigators are deciding whether it’s a case for the Federal Trade Commission or the Department of Justice, which led the prosecution of Microsoft for monopoly abuses in the 90s. This is no Microsoft case, though. Regulators will find it tough to prove that Apple is stifling competition. In the first quarter of this year, every smartphone manufacturer saw massive growth in unit shipments. Apple isn’t even the dominant player. It trails Research in Motion with a 16 per cent smartphone market share versus RIM’s 20 per cent.

Many of Apple’s competitors -- Google, Palm, Microsoft, Nokia and RIM -- have growing app stores. Developers are not going to convince anyone that Apple’s moves make it more difficult to find a ready market for their apps. “This move reflects Apple’s aesthetic vision rather than its strategic vision,” said O’Reilly. “Apple’s relentless focus on controlling the user experience is leading to some very large wins.

So it may well be, quoting from the Greek writer Archilochus: ‘The fox knows many things, but the hedgehog knows one big thing.’” Marc Hedlund, founder and CEO of the personal finance website Wesabe and a veteran Silicon Valley entrepreneur, put it simply: “Steve hates things that look like crap and work like crap and he believes Flash looks and works like crap."